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Like the song says, investors are looking for stocks to love in all the wrong places. They'll pile into the momentum stocks everyone else buys, but ignore lesser-known opportunities for fear of straying from the crowd.

Yet the search for undiscovered jewels has informed many of our Motley Fool Hidden Gems picks, from Buffalo Wild Wings to TransDigm Group. Overlooked by Wall Street and Main Street, and thus undervalued, these stocks hold the best potential to deliver outsized returns.

The Motley Fool CAPS community knows a bargain when it sees one. Below, you'll find several under-the-radar stocks that brim with promise. These companies have garnered less than 100 active recommendations on CAPS, despite earning analysts' estimates of double-digit long-term growth:


CAPS Rating (out of 5)

No. of Active Picks

Est. LT Growth Rate

DragonWave (Nasdaq: DRWI  )




Occam Networks (Nasdaq: OCNW  )




US Energy (Nasdaq: USEG  )




Source: Yahoo! Finance and CAPS.

Naturally, we want you to look a bit closer at these stocks before buying. Maybe investors are staying away from these stocks for a reason. Make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Under the radar
Does DragonWave still have contracts with Clearwire, which provided 83% of its third-quarter revenue? Investors in the microwave backhaul equipment maker sure hope so. They're also crossing their fingers that AT&T (NYSE: T  ) didn't choose another supplier for its network.

That's a lot of a-hoping and a-praying to keep the stock from completely flatlining; it's down 33% from its 52-week high. Management is trying to ease investors' fears by announcing a stock buyback program.

CAPS All-Star brianpivar thinks DragonWave presents an opportunity to profit from others' concerns: "Good lookin EPS for the next couple of years. Playing off fear that DRWI won't get ATT and Verizon contracts, even if they don't get the contracts this stock should still be at $14 by the end of the year."

Downloading profits
Bringing broadband service to rural areas seems as mundane as it sounds, but the task is not without challenges. With billions promised for the endeavor, Occam Networks hopes to make it a reality -- perhaps even at a profit. Its networks were recently included in a list of materials recommended to service providers when applying for government grants for their buildouts.

Qwest Communications (NYSE: Q  ) is one of the companies seeking stimulus funding for its $467 million rural broadband expansion plan. Taxpayers would foot the bill for three-quarters of the initiative, or $350 million, with Qwest funding the balance.

As Occam's customers win their own taxpayer-financed grants, fireinyoureyes says its networks sales will expand very nicely: "Best and safest play on the Broadband Stimulus program. Some of their customers will win grants and loans, which will boost sales exponentially within the next year or two."

Holy moly!
Molybdenum has one of the highest melting points of any metal, making it a preferred ingredient in many high-strength steel alloys. It is mined as an ore on its own, and recovered as a byproduct of copper mining. Thus it's not surprising that copper miner Freeport-McMoRan (NYSE: FCX  ) is the world's largest producer of molybdenum.

The metal might also be a rich vein for U.S. Energy, which could be paid as much as $400 million over the next several years if Thompson Creek Metals (NYSE: TC  ) exercises its option to purchase up to 75% of its Mount Emmons molybdenum property. In the meantime, U.S. Energy is diversifying its operations with oil and gas exploration projects. CAPS All-Star member HallShadow thinks the company's lucrative in its own right:

If you've done your due diligence, you'll know this stock is cheap as dirt from oil production increases alone, let alone the molybdenum and uranium "imbedded call options," so to speak. This company has loads of cash, nominal debt, and near-term growth prospects like few others.

Keep a high profile
Sign up today for the completely free Motley Fool CAPS service, and tell us whether these low-profile stocks are on their way to higher returns. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.

Buffalo Wild Wings and TransDigm Group are Motley Fool Hidden Gems selections. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

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10/21/2016 4:00 PM
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